In the almighty pursuit of efficiency, Alexa’s powers to liberate people from menial mental chores and keep entire organizations on-time and on-track reading from (listening to) the same script does have extraordinary benefits. But, is it much more than a digital intercom system — that we essentially already have three versions of [Read more…]
Women In HVACR Invites You to WHVACR’s Meet & Greet — Tues Night 6:30pm @ Margaritaville Restaurant on Chicago’s Navy Pier!
Also, be sure to visit WHVACR @ Booth #7060! [Read more…]
Every so often, the disruptive deployment of technology seems to kind of sneak up on us — in part, because it is impossible to know about all things relevant and their progress at all times; and in part, because it is difficult to project the rate of adoption and the impact of these seemingly innocuous, yet inevitable game-changers. [Read more…]
As the “gray hairs” in the Smart Buildings Controls Industry begin to retire, we need to attract and keep younger people if our Industry is going to grow. That means we are going to have to understand that the next group coming into Smart Building Controls, the “millennials”, are not wired the way we are. The irony is that they are a creation of our our making, and are motivated and inspired by different things than their baby boomer parents and grand parents. In this video, one of the great minds of our time, Simon Sinek, shares profound knowledge about the next generation coming into Smart Building Controls. [Read more…]
JJL is on the move, check out this press release:
Mike Carter brings specialized expertise in workplace technology and IoT solutions
CHICAGO, Oct. 12, 2017 – JLL continues to strengthen its rapidly growing Smart Building Program with the appointment of Michael Carter as Senior Solutions Consultant. Based in Philadelphia, Carter joins JLL with more than 30 years of experience in building and workplace technologies. Throughout his career, he has led global deployments of Internet of Things (IoT) and smart building technologies in corporate, government, education, multifamily, retail and multi-use facilities.
In his new role at JLL, Carter will [Read more…]
Which manufacturer has taken a page out of legendary Green Bay Packers football coach Vine Lombardi’s playbook?
There is a new player in the sensor game, that wants to revolutionize the way sensors are done in smart buildings, do you know who it is?
“Making the turn” is not just a golf term, find out how it relates to John Donahue, Kele and the Smart Buildings Controls world.
As the man, the myth, the legend, Ken Smyers, and I complete our fall travel schedules, we will be getting back to the weekly ControlTalk Now Episodes starting next week. Until then, please enjoy this much shorter version of the show.
Ken and I often speak of the “new realities” that face all businesses including those in the Smart Building Controls Industry.
With changes coming at all of us faster than a 110 mph fastball with a nasty spin, just like good baseball hitters, we have to try and get an edge by anticipating the next pitch. ControlTrends is about trying to “steal the signs” and give our community an advantage, be it regarding new technology, or new business trends.
We have been following Steve Blank since we heard him speak at the last Tridium summit. His insights are spot on and we encourage you, if you have not already to sign up for his news letter. You will not be disappointed.
With the big news last week, of our friend John Donahue selling his company to Kele, and with the arrival of Steve’s latest news letter, the stars of synchronicity seem to aligned. As such, we have decided to post Steve’s thoughts and we invite you to read about the new realities of venture capitalist and how it will effect you, should you like our friend John decide to sell, or if you, like the rest of us, wonder how we will be effected by such mergers.
The following is a copy of Steve’s most recent news letter.
Uber, Zenefits, Tanium, Lending Club CEOs of companies with billion dollar market caps have been in the news – and not in a good way. This seems to be occurring more and more. Why do these founders get to stay around?
Because the balance of power has dramatically shifted from investors to founders.
Here’s why it generates bad CEO behavior.
Unremarked and unheralded, the balance of power between startup CEOs and their investors has radically changed:
- IPOs/M&A without a profit (or at times revenue) have become the norm
- The startup process has become demystified – information is everywhere
- Technology cycles have become a treadmill, and for startups to survive they need to be on a continuous innovation cycle
- VCs competing for unicorn investments have given founders control of the board
20th Century Tech Liquidity = Initial Public Offering
In the 20th century tech companies and their investors made money through an Initial Public Offering (IPO). To turn your company’s stock into cash, you engaged a top-notch investment bank (Morgan Stanley, Goldman Sachs) and/or their Silicon Valley compatriots (Hambrecht & Quist, Montgomery Securities, Robertson Stephens).
Typically, this caliber of bankers wouldn’t talk to you unless your company had five profitable quarters of increasing revenue. And you had to convince the bankers that you had a credible chance of having four more profitable quarters after your IPO. None of this was law, and nothing in writing required this; this was just how these firms did business to protect their large institutional customers who would buy the stock.
Twenty-five years ago, to go public you had to sell stuff – not just acquire users or have freemium products. People had to actually pay you for your product. This required a repeatable and scalable sales process, which required a professional sales staff and a product stable enough that customers wouldn’t return it.
Hire a CEO to Go Public
More often than not, a founding CEO lacked the experience to do these things. The very skills that got the company started were now handicaps to its growth. A founder’s lack of credibility/experience in growing and managing a large company hindered a company that wanted to go public. In the 20th century, founding CEOs were most often removed early and replaced by “suits” — experienced executives from large companies parachuted in by the investors after product/market fit to scale sales and take the company public.
The VCs would hire a CEO with a track record who looked and acted like the type of CEO Wall Street bankers expected to see in large companies.
A CEO brought in from a large company came with all the big company accoutrements – org charts, HR departments with formal processes and procedure handbooks, formal waterfall engineering methodology, sales compensation plans, etc. — all great things when you are executing and scaling a known business model. But the CEO’s arrival meant the days of the company as a startup and its culture of rapid innovation were over.
For three decades (1978-2008), investors controlled the board. This era was a “buyer’s market” – there were more good companies looking to get funded than there were VCs. Therefore, investors could set the terms. A pre-IPO board usually had two founders, two VCs and one “independent” member. (The role of the independent member was typically to tell the founding CEO that the VCs were hiring a new CEO.)
Replacing the founder when the company needed to scale was almost standard operating procedure. However, there was no way for founders to share this information with other founders (this was life before the Internet, incubators and accelerators). While to VCs this was just a necessary step in the process of taking a company public, time and again first-time founders were shocked, surprised and angry when it happened. If the founder was lucky, he got to stay as chairman or CTO. If he wasn’t, he told stories of how “VCs stole my company.”
To be fair there wasn’t much of an alternative. Most founders were woefully unequipped to run companies that scaled. It’s hard to imagine, but in the 20th century there were no startup blogs or books on startups to read, and business schools (the only places teaching entrepreneurship) believed the best thing they could teach startups was how to write a business plan. In the 20th century the only way for founders to get trained was to apprentice at another startup. And there they would watch the canonical model in action as an experienced executive replaced the founder.
Technology Cycles Measured in Years
Today, we take for granted new apps and IoT devices appearing seemingly overnight and reaching tens of millions of users – and just as quickly falling out of favor. But in the 20th century, dominated by hardware and software, technology swings inside an existing market happened slowly — taking years, not months. And while new markets were created (i.e. the desktop PC market), they were relatively infrequent.
This meant that disposing of the founder, and the startup culture responsible for the initial innovation, didn’t hurt a company’s short-term or even mid-term prospects. A company could go public on its initial wave of innovation, then coast on its current technology for years. In this business environment, hiring a new CEO who had experience growing a company around a single technical innovation was a rational decision for venture investors.
However, almost like clockwork, the inevitable next cycle of technology innovation would catch these now-public startups and their boards by surprise. Because the new CEO had built a team capable of and comfortable with executing an existing business model, the company would fail or get acquired. Since the initial venture investors had cashed out by selling their stock over the first few years, they had no long-term interest in this outcome.
Not every startup ended up this way. Bill Hewlett and David Packard got to learn on the job. So did Bob Noyce and Gordon Moore at Intel. But the majority of technology companies that went public circa 1979-2009, with professional VCs as their investors, faced this challenge.
Founders in the Driver’s Seat
So how did we go from VCs discarding founders to founders now running large companies? Seven major changes occurred:
- It became OK to go public or get acquired without profit (or even revenue)
In 1995 Netscape changed the rules about going public. A little more than a year old, the company and its 24-year-old founder hired an experienced CEO, but then did something no other tech company had ever done – it went public with no profit. Laugh all you want, but at the time this was unheard of for a tech company. Netscape’s blow-out IPO launched the dot-com boom. Suddenly tech companies were valued on what they might someday deliver. (Today’s version is Tesla – now more valuable than Ford.)
This means that liquidity for today’s investors often doesn’t require the long, patient scaling of a profitable company. While 20th century metrics were revenue and profit, today it’s common for companies to get acquired for their user base. (Facebook’s ~$20 billion acquisition of WhatsApp, a 5-year-old startup that had $10 million in revenue, made no sense until you realized that Facebook was paying to acquire 300 million new users.)
2. Information is everywhere
In the 20th century learning the best practices of a startup CEO was limited by your coffee bandwidth. That is, you learned best practices from your board and by having coffee with other, more experienced CEOs. Today, every founder can read all there is to know about running a startup online. Incubators and accelerators like Y-Combinator have institutionalized experiential training in best practices (product/market fit, pivots, agile development, etc.); provide experienced and hands-on mentorship; and offer a growing network of founding CEOs. The result is that today’s CEOs have exponentially more information than their predecessors. This is ironically part of the problem. Reading about, hearing about and learning about how to build a successful company is not the same as having done it. As we’ll see, information does not mean experience, maturity or wisdom.
3. Technology cycles have compressed
The pace of technology change in the second decade of the 21st century is relentless. It’s hard to think of a hardware/software or life science technology that dominates its space for years. That means new companies are at risk of continuous disruption before their investors can cash out.
To stay in business in the 21st century, startups do four things their 20th century counterparts didn’t:
- A company is no longer built on a single innovation. It needs to be continuously innovating – and who best to do that? The founders.
- To continually innovate, companies need to operate at startup speed and cycle time much longer their 20th century counterparts did. This requires retaining a startup culture for years – and who best to do that? The founders.
- Continuous innovation requires the imagination and courage to challenge the initial hypotheses of your current business model (channel, cost, customers, products, supply chain, etc.) This might mean competing with and if necessary killing your own products. (Think of the relentless cycle of iPod then iPhone innovation.) Professional CEOs who excel at growing existing businesses find this extremely hard. So who best to do it? The founders.
- Finally, 20th century startups fired the innovators/founders when they scaled. Today, they need these visionaries to stay with the company to keep up with the innovation cycle. And given that acquisition is a potential for many startups, corporate acquirers often look for startups that can help them continually innovate by creating new products and markets.
4. Founder-friendly VCs
A 20th century VC was likely to have an MBA or finance background. A few, like John Doerr at Kleiner Perkins and Don Valentine at Sequoia, had operating experience in a large tech company, but none had actually started a company. Out of the dot-com rubble at the turn of the 21st century, new VCs entered the game – this time with startup experience. The watershed moment was in 2009 when the co-founder of Netscape, Marc Andreessen, formed a venture firm and started to invest in founders with the goal of teaching them how to be CEOs for the long term. Andreessen realized that the game had changed. Continuous innovation was here to stay and only founders – not hired execs – could play and win. Founder-friendly became a competitive advantage for his firm Andreessen Horowitz. In a seller’s market, other VCs adopted this “invest in the founder” strategy.
5. Unicorns Created A Seller’s Market
Private companies with market capitalization over a billion dollars – called Unicorns – were unheard of in the first decade of the 21st century. Today there are close to 200. VCs with large funds (~>$200M) need investments in Unicorns to make their own business model work.
While the number of traditional VC firms have shrunk since the peak of the dot com bubble, the number of funds chasing deals have grown. Angel and Seed Funds have usurped the role of what used to be Series A investments. And in later stage rounds an explosion of corporate VCs and hedge funds now want in to the next unicorns.
A rough calculation says that a VC firm needs to return four times its fund size to be thought of as a great firm. Therefore, a VC with a $250M fund (5x the size of an average VC fund 40 years ago) would need to return $1 billion. But VCs own only ~15% of a startup when it gets sold/goes public (the numbers vary widely). Just doing the math, $1 billion/15% means that the VC fund needs $6.6 billion of exits to make that 4x return. The cold hard math of “large funds need large exits” is why VCs have been trapped into literally begging to get into unicorn deals.
6. Founders Take Money Off the Table
In the 20th century the only way the founder made any money (other than their salary) was when the company went public or got sold. The founders along with all the other employees would vest their stock over 4 years (earning 1/48 a month). They had to hang around at least a year to get the first quarter of their stock (this was called the “cliff”). Today, these are no longer hard and fast rules. Some founders have three-year vesting. Some have no cliff. And some have specific deals about what happens if they’re fired, demoted or the company is sold.
In the last decade, as the time startups have spent staying private has grown longer, secondary markets – where people can buy and sell pre-IPO stock — have emerged. This often is a way for founders and early employees to turn some of their stock into cash before an IPO or sale of company.
One last but very important change that guarantees founders can cash out early is “founder friendly stock.” This allows founder(s) to sell part of their stock (~10 to 33%) in a future round of financing. This means the company doesn’t get money from new investors, but instead it goes to the founder. The rationale is that since companies are taking longer to achieve liquidity, giving the founders some returns early makes them more willing to stick around and better able to make bets for the long-term health of the company.
7. Founders take Control of the Board
With more VCs chasing a small pool of great deals, and all VCs professing to be the founder’s best friend, there’s an arms race to be the friendliest. Almost overnight the position of venture capitalist dictating the terms of the deal has disappeared (at least for “hot” deals).
Traditionally, in exchange for giving the company money, investors would receive preferred stock, and founders and employees owned common stock. Preferred stock had specific provisions that gave investors control over when to sell the company or take it public, hiring and firing the founder etc. VCs are giving up these rights to get to invest in unicorns.
Founders are taking control of the board by making the common stock the founders own more powerful. Some startups create two classes of common stock with each share of the founders’ class of common stock having 10 – 20 votes. Founders can now outvote the preferred stock holders (the investors). Another method for founder control has the board seats held by the common shareholders (the founders) count 2-5 times more than the investors’ preferred shares. Finally, investors are giving up protective voting control provisions such as when and if to raise more money, the right to invest in subsequent rounds, who to raise it from and how/when to sell the company or take it public. This means liquidity for the investors is now beholden to the whims of the founders. And because they control votes on the board, the founders can’t be removed. This is a remarkable turnabout.
In some cases, 21st century VCs have been relegated to passive investors/board observers.
And this advent of founders’ control of their company’s board is a key reason why many of these large technology companies look like they’re out of control. They are.
The Gift/Curse of Visionary CEOs
Startups run by visionaries break rules, flout the law and upend the status quo (Apple, Uber, AirBnB, Tesla, Theranos, etc.). Doing something that other people consider insanity/impossible requires equal parts narcissism and a messianic view of technological transformation.
Bad CEO behavior and successful startups have always overlapped. Steve Jobs, Larry Ellison, Tom Seibel, etc. all had the gift/curse of a visionary CEO – they could see the future as clearly as others could see the present. Because they saw it with such clarity, the reality of having to depend on other people to build something revolutionary was frustrating. And woe to the employee who got in their way of delivering the future.
Visionary CEOs have always been the face of their company, but today with social media, it happens faster with a much larger audience; boards now must consider what would happen to the valuation of the company without the founder.
With founders now in control of unicorn boards, with money in their pockets and the press heralding them as geniuses transforming the world, founder hubris and bad behavior should be no surprise. Before social media connected billions of people, bad behavior stayed behind closed doors. In today’s connected social world, instant messages and shared videos have broken down the doors.
Before the rapid rise of Unicorns, when boards were still in control, they “encouraged” the hiring of “adult supervision” of the founders. Three years after Google started they hired Eric Schmidt as CEO. Schmidt had been the CEO of Novell and previously CTO of Sun Microsystems. Four years after Facebook started they hired Sheryl Sandberg as the COO. Sandberg had been the vice president of global online sales and operations. Today unicorn boards have a lot less leverage.
- VCs sit on 5 to 10 or more boards. That means most VCs have very little insight into the day-to-day operation of a startup. Bad behavior often goes unnoticed until it does damage.
- The traditional checks and balances provided by a startup board have been abrogated in exchange for access to a hot deal.
- As VC incentives are aligned to own as much of a successful company as possible, getting into a conflict with a founder who can now prevent VC’s from investing in the next round is not in the VCs interest.
- Financial and legal control of startups has given way to polite moral suasion as founders now control unicorns.
- As long as the CEO’s behavior affects their employees not their customers or valuation, VCs often turn a blind eye.
- Not only is there no financial incentive for the board to control unicorn CEO behavior, often there is a downside in trying to do so
The surprise should not be how many unicorn CEOs act badly, but how many still behave well.
- VC/Founder relationship have radically changed
- VC “Founder Friendly” strategies have helped create 200+ unicorns
- Some VC’s are reaping the downside of the unintended consequences of “Founder Friendly”
- Until the consequences exceed the rewards they will continue to be Founder Friendly
Opportunities include free seminars, professional certifications and continuing education courses
WESTPORT, Conn., October 17, 2017 – The 2018 AHR Expo has expanded its seminar program, making it the largest-ever education and training agenda in the Show’s history. The expansive program features more than 120 sessions including free best practices and industry trends seminars from leading HVACR organizations, professional certification opportunities, and continuing education programs from the ASHRAE Learning Institute (ALI).
The 2018 AHR Expo will be held Jan. 22-24 at McCormick Place in Chicago. To register, please visit the AHR Expo registration website.
“Contractors, engineers and other Show attendees always give us high marks for the value our education program delivers, and this year we have surpassed ourselves,” said Clay Stevens, president of International Exposition Company. “The Show has become THE place where industry professionals can earn CEUs, complete certification exams, and learn about the latest developments and best practices in free and paid seminars.”
More than 70 of the free, one- and two-hour sessions will be presented by experts from prominent industry-leading organizations. Sessions have been designed to allow for easy integration of valuable education time into attendees’ overall Show agendas.
Highlights of the agenda include:
General Industry-wide Focus
Building Automation Systems 101
Radiant Cooling in the Windy City
Global Trends in HVAC
Engineer-focusedCooling Tower Fundamentals
The Future of Building Automation – Data at the Open Intelligent Edge
Health Impacts of Indoor Air Quality
The Future of The Billable Hour, by Women in HVACR
Solving Moisture Mysteries with a Psychrometric Chart
Solve Hidden Maintenance Issues Using Testing and Balancing
AHR Expo will incorporate many opportunities for attendees to participate in ALI continuing education courses. A total of 20 courses will be offered prior to and during the 2018 AHR Expo coming to Chicago in January. All courses are approved for Continuing Education Units (CEUs) toward maintaining P.E. licensure. Advance registration and fee payment is required and can be completed by visiting ASHRAE’s registration website.
Each full-day course will earn attendees six Professional Development Hours (PDHs)/Learning Units (LUs) or 0.6 CEUs, and half-day courses earn attendees three PDHs. Topics include the fundamentals of the commissioning process, complying with requirements of ASHRAE standards, laboratory design basics and beyond, optimizing indoor environments and more.
Several review sessions and exams will be available to 2018 AHR Expo attendees, including:
NAFA Certified Air Filter Specialist (CAFS) Testing and 2-Hour Tutorial; NCT Testing
AABC Commissioning Group (ACG) CxA Workshop and Exam
HVAC Review and NATE (North American Technician Excellence) Testing
ASHRAE Certification Exams
Registration and a fee are required for all review sessions and exams.
NEW PRODUCT AND TECHNOLOGY THEATER PRODUCT PRESENTATIONS
In addition, attendees can see what’s new from the industry’s leading companies in the New Product and Technology Showcase Presentations offered by exhibitors. With no cost and no reservation required, more than 100 20-minute product presentations will be delivered in rapid-fire succession in special theaters on the exhibit floor. The Showcase provides an efficient way to learn about the latest developments from the industry’s leading technology providers.
Two AHR Expo Innovation Award winners, Spartan Bioscience and Triatek, as well as 11 finalists, will give presentations on their new technologies:
BELIMO (Building Automation)
Caleffi Hydronic Solutions (Plumbing)
CAREL Industries S.p.A. (Refrigeration)
Cielo WiGle Inc. (Building Automation)
Coolfront Technologies (Software)
GrayWolf Sensing Solutions (Tools & Instruments)
International Wastewater Systems Inc. (Green Building)
Johnson Controls (Cooling & Heating)
Spartan Bioscience (IAQ)
A complete list of 2018 AHR Expo educational opportunities can be found at http://ahrexpo.com/education-overview/. For registration and additional information regarding the 2018 AHR Expo, visit ahrexpo.com.
About AHR Expo
The AHR Expo (International Air-Conditioning, Heating, Refrigerating Exposition) is the world’s largest HVACR event, attracting more than 2,000 exhibitors and 65,000+ attendees every year. Since 1930, the Show has provided a unique forum for the entire HVACR industry, including OEMs; engineers; contractors; manufacturers; distributors; commercial, industrial and institutional facility operators; and educators to come together and discover the latest products, learn about new technologies and develop mutually beneficial business relationships. This year’s Show, co-sponsored by ASHRAE and AHRI, will be held Jan. 22-24, 2018 at McCormick Place, Chicago, and is held concurrently with ASHRAE’s Winter Conference.
For more information, visit ahrexpo.com and follow @ahrexpo on Twitter.
A message from Darius Adamczyk, Honeywell President and CEO
Honeywell Announces Planned Portfolio Changes
|Today, we announced several important planned changes to our portfolio that will position the Company for sustainable organic sales growth and margin expansion within a more focused set of end markets. You can read the details about these changes – including our intention to spin off our Homes product portfolio and ADI global distribution business as well as our Transportation Systems business into two stand-alone, publicly-traded companies – in this morning’s press release and in our presentation to investors.|
|These are big changes for the Company, and I want to emphasize that regardless of whether an employee will remain with Honeywell or join the new Homes or TS businesses, all employees will continue to be part of dynamic organizations whose top priority is to bring value to their customers by offering technology-differentiated solutions. There will be many new professional opportunities to grow and thrive. Above all, we will be in a terrific position to continue to perform for our customers, our shareowners, and for each other. Let’s remember the spins will likely not occur until late next year and, until then, both businesses will remain fully a part of Honeywell. We must stay focused at all times on doing a great job for our customers and executing on our business plans.|
|The changes announced today follow the completion of a comprehensive review of our portfolio. We evaluated each business unit using numerous criteria, including growth outlook, financial performance, market dynamics, potential for disruption, and, most importantly, assessment of fit as a Honeywell business. We considered which businesses would benefit most from continuing to be part of Honeywell, and which would benefit from independent strategic and capital allocation decision making tailored for their evolving end markets. The remaining Honeywell portfolio will consist of high-growth businesses that are aligned to six attractive industrial end markets, driven by mega trends such as energy efficiency, infrastructure investment, urbanization, and safety. This portfolio will present us with numerous opportunities to pursue organic and inorganic growth and margin expansion through further deployment of our world-class HOS Gold operating system and the Honeywell Sentience Platform.|
|I also want to take this opportunity to welcome Gary Michel to Honeywell in his new role as HBT President and CEO. Gary will report to me and serve as a Company officer. He brings 32 years of leadership experience from Ingersoll-Rand Company, where he demonstrated a deep understanding of his customers and end markets, and the ability to translate this knowledge into technology-differentiated offerings that bring value to customers. Gary succeeds Terrence Hahn, who will move into a leadership role in preparing the Homes Products and ADI businesses for the spin and will continue to report directly to me. I would like to thank Terrence for his leadership in establishing HBT and building on our strong positions in these markets.|
|Finally, I would like to acknowledge the Honeywell Process Solutions team within Performance Materials and Technologies (PMT) in advance for the work they will do to integrate the Smart Energy business into their portfolio. These businesses are a great fit with each other, and we anticipate that their combination will allow us to expand our industrial metering, control system,and software capabilities and serve a broader set of customers.|
|As a reminder, I will be hosting an all-employee global town meeting at 11 a.m. EDT on Friday, October 20. Please be sure to attend, as I will provide more details and insights into today’s announcements and answer any questions you may have.|
|Thank you for all your hard work and support.|